Appellate court awards $600K in back rent to luxury hotel and possession of leased premises; orders hearing on additional damages
David Rich and Matt Furman persuaded the Appellate Division of the Boston Municipal Court to award their luxury hotel client nearly $600,000 in unpaid base rent from a restaurant operator and possession of the leased commercial premises.
The Appellate Division remanded the case to the trial court for a determination of the damages warranted in excess of the unpaid base rent, including any amounts owed under a percentage rent provision of the parties’ lease. Evidence at trial demonstrated that the restaurant’s unpaid percentage rent was in excess of $1 million.
The dispute arose after the firm’s hotel client in December 2021 agreed to offset $500,000 in revenue sharing it owed to the tenant as partial payment for the unpaid base rent exceeding $1 million.
The agreement stated that even though the hotel could offset against unpaid rent the entire $1.07 million it owed for revenue share, it agreed to retain $500,000 “on account of” the arrearages under the lease and to pay the remainder of the revenue share to the restaurant.
The Appellate Division reversed the trial court judge’s finding that the phrase “on account of” was ambiguous.
“[T]he legal definition and the ordinary meaning of the term ‘on account of,’” the Appellate Division wrote, “can only lead to the conclusion that the amount of money that the [hotel] withheld was because of the unpaid rent, not in satisfaction of it.”
The panel reversed the trial judge’s ruling that the partial offset fully satisfied the restaurant’s unpaid rental obligations, noting that the hotel agreed to the partial offset to allow the restaurant to function following the lifting of COVID-19 restrictions.
On the question of percentage rent owed by the restaurant to the hotel under the commercial lease, the Appellate Division rejected the lower court’s ruling that a “good faith” effort to comply with the lease excused the restaurant’s breach and remanded the case for an assessment of damages hearing along with the summary process judgment for possession.